The UK’s income inequality is regional inequality

We’ve long said here that inequality in the UK really just isn’t quite what we’re all told it is. It’s not that we have plutocrats in every part of the country, lording it over the surrounding peasantry. No, our high overall inequality numbers are as a result of wages being very much higher in some regions of the country (and the living costs in those parts are higher too, substantially decreasing consumption inequality). And this all works in a manner unlike any of the other european countries, London and it’s economic dominance, and higher wages, being quite unlike what happens elsewhere.

Which makes these numbers from the Resolution foundation, funded by the Rowntree folks, so interesting:

Cities in the south of England – such as London, Reading and Milton Keynes – tend to have the highest levels of wage inequality and employment polarisation. The Gini coefficient of wages (a measure of inequality) is 0.337 in London, the most unequal city.

Smaller cities and those that have experienced industrial decline – such as Sunderland and Burnley – tend to have the most equal labour markets. The most equal city, Sunderland, has a Gini coefficient of only 0.237.

The main driver of urban inequality is affluence. Cities with higher average wages and knowledge based economies tend to be more unequal. Cities with weaker local economies generally have lower levels of wage inequality and employment polarisation.

Just to give you a couple of benchmarks, the market wages gini for the UK as a whole is some .45, .46 or so, that of Sweden about the same. The post tax and post benefits numbers for both countries are around .33 and .25.

Even in the most unequal area in the UK the market gini is substantially below the gini for the country as a whole. This is showing us that it is indeed regional differences, not a generally widespread inequality, that is to blame. Further, in the most equal parts of the UK the local inequality is actually less, even at market wages, than the post tax, post benefits, inequality in Sweden.

There really is something substantially different about inequality in the UK. If you look at US inequality then you find that the wage inequality in each State is not that different from the inequality across the country as a whole. It would not surprise me at all to find that being true of much of Europe. But it simply isn’t the case here. We really are different: and it’s London that makes us so.